Argentina ruling puts pressure on BNY Mellon

* Odds shorten on Argentinian default after ruling

* Judge cites payment agents as active participants

LONDON, Nov 22 (IFR) - Argentina is likely to default next
month unless Bank of New York Mellon and other US payment agents
are prepared to defy a court order and pay USD3bn to holders of
the country's GDP warrants on December 15.

The odds have jumped after a New York judge set out on
Wednesday evening how Argentina should comply with an earlier
ruling that it must pay investors in its old defaulted bonds in
full at the same time as paying holders of instruments that most
investors took in 2005 and 2010 exchanges.

Replying to an appeal court request to set out how this
ruling should be implemented, district court Judge Thomas Griesa
said the full USD1.3bn due to NML Capital and other plaintiffs
should be paid if Argentina goes ahead with the payment to the
GDP warrant holders.

"The amount that is currently due is the amount of the
unpaid principal, the due date of which has been accelerated,
and accrued interest. The total...is approximately USD1.33bn,"
said Judge Griesa.

He added: "Argentina must pay that USD1.33bn concurrently
with or in advance of the payments on the exchange bonds.
Argentina owes this and owes it now. After 10 years of
litigation this is a just result."

Argentina's President Cristina Kirchner and other members of
her government have indicated that they will never pay such
holdouts, since its appeal was rejected in New York on October
26. That view is unlikely to change.

"It would be a big loss of face for the country to pay the
holdout creditors," said a senior capital markets lawyer.

But even though Argentina may have the capacity to pay its
exchange bondholders, the latest ruling from Judge Griesa
suggests this may be hard to execute. He warned that critical US
payment system agents would be defying the court if they make
the USD3bn payment, without the holdouts receiving their money.

ACTING IN CONCERT

In his order Judge Griesa cited trustee Bank of New York
Mellon, nominees Cede & Co and BNY Depositary and clearing
systems operators such as the Depository Trust Company as acting
"in active concert or participation with the Republic to
assist...in fulfilling its payment obligations under the
exchange bonds."

"Under the circumstances, these third parties should
properly be held responsible for making sure that their actions
are not steps to carry out a law violation, and they should
avoid taking such steps," he ruled. The injunction must be
served physically on these bodies to bind them.

Prior to the most recent ruling, BNY Mellon said it would
"comply with any court order by which it is deemed bound, as
well as its duties and obligations to the exchange bondholders
under the indenture." The institution declined to update its
position following the latest ruling.

The payment to exchange bondholders could be made via a
different route, said the lawyer. But the order requires
Argentina to seek court approval if it was to alter or amend
"specific transfer mechanisms by which it makes payments on the
exchange bonds".

"So the country is likely to go into payment default because
of the mechanism not getting sums due to exchange holders," said
the lawyer.

The appeal court will now respond to Judge Griesa's
decisions. Argentina has also requested a rehearing of its
appeal 'en banc'. In March the sovereign secured a stay on
proceedings until the appeal process ended.

But this has now been ended by Judge Griesa, who wants his
original order carried out forthwith. "This means that the order
will be applicable to the interest payments to exchange
bondholders in December 2012," he ruled.

The first such payment of USD42m on December 2 is allowed by
the judge but he called for the USD3bn due on December 15,
relating to GDP warrants, to be placed in an escrow account
awaiting the final decisions of the appeal court.

"The December 15, 2012 interest payments due to exchange
bondholders cannot be made unless Argentina certifies that it is
making the appropriate payment for the benefit of plaintiffs to
the escrow account, either in advance of or concurrent with any
payment to exchange bondholders," he said.
(Reporting by Christopher Spink; Editing by Sudip Roy)

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